"This Rocky Ridge property had an investor hire a former professional athlete to recruit clients, and after several flips the property has one mortgage wrongly discharged and another huge mortgage currently on the property. The current deficiency is approximately $800,000."

"This SE Calgary residential house has been condemned by Alberta Health as a grow-op. The fraudster here was previously employed as a mortgage specialist with a major bank"

"This apartment building in Calgary SW has units worth maybe $150,000, and at least one of them has a mortgage of around $280,000".

"This is a 16 unit apartment building in NE Calgary which has been sitting empty from December 2008 until early 2012, and during that time every unit was in foreclosure"

"The person buying this property offered $220,000 and agreed to a $205,000 mortgage. A year later the buyer discovered that he had a mortgage of $305,000 on the property."

"This house in the Westbrook area of Calgary was passed onto two parties who did not know each other. Seven years later the fraudster is in jail, and the parties who were on title are still sorting out the mess".

This is only a small sampling of dozens upon dozens of mortgage fraud files in Calgary right now.

There are several apartment buildings in Calgary where the entire building is in foreclosure!!

The Basics of Calgary Mortgage Fraud Scam

1st Step - Somebody, usually an unregulated “property investor”, picks up a foreclosed property at a discount price.

2nd Step - The “property investor” sends out signals, usually by word of mouth, that he would like someone to invest in the property, and as an inducement, the “property investor” is willing to pay someone cash to purchase the property (usually the inducement is $5,000 cash). The investor is looking for someone with good credit, and usually the person is not someone who would normally be a property investor (many students, new Canadians, people from other cities have been victims).

3rd Step - The investor arranges a mortgage for the “victim buyer” or "straw-buyer", usually through a broker. The mortgage is a high ratio mortgage, and is way above the value of the property. The investor makes up fraudulent qualifying information of the “victim buyer”/ "straw-buyer".

4th Step - A “victim buyer”, or sometimes known as a "straw-buyer", is found and then the investor arranges for legal services at either a small law office, or with a non-lawyer real estate paralegal. The hired person doing the property conveying does the service for both the investor and the “victim buyer” or "straw-buyer". Sometimes the deal is the investor selling directly to the “victim buyer” / "straw-buyer"; other times it is a middle person buying the foreclosed property and reselling to the “victim buyer” / "straw-buyer".

5th Step - Once the transaction is actually completed, the seller (the property investor) actually manages the property for the first while, and makes payments on the mortgage for the “victim buyer” / "straw-buyer".

Collapse - At some point, usually after 6 months to a year, the “plan” collapses. The investor tries to get another person to "buy" the property and assume the mortgage, (usually from a person who cannot qualify otherwise for a mortgage), but often this "plan" is not successful. As a result, now the property investor takes off, or no longer supports the property. The property which is in the name of the “victim buyer” / "straw-buyer" and this person on title is now responsible for mortgage payments, as well as management of the property.

Very often, the "victim buyer" / "straw-buyer" cannot make the mortgage payments, and the property goes into foreclosure. At this point, the mortgage pay-out is way more than the property is worth (called a mortgage deficiency judgment).

Once in foreclosure, as part of the legal proceeding, the bank typically takes back the property, and also attempts to collect the mortgage deficiency (anywhere from $50,000 to $250,000) from the “victim buyer” / "straw-buyer". This procedure, in legal terms, is called a "Rice Order".

Many "straw-buyers" simply have to go into personal bankruptcy to pay the deficiency judgment.

Ron Reinhold recently had an article published in the AMBA Winter 2009 magazine.